The Social Security Administration announced Thursday that Social Security recipients will receive an annual cost-of-living adjustment of 8.7% next year, the largest increase since 1981.
The surge will increase monthly payments to retirees by $146 to an estimated average of $1,827 for 2023.
The next huge increase 5.9% adjustment for this yearaims to help nearly 70 of Social Security million Beneficiaries are dealing with the high inflation that has plagued the United States since last year.
“Will COLA be enough to keep pace with inflation? It depends on what inflation does from October onwards,” said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League, an advocacy group.
The adjustment is the highest most current recipients have ever seen, but that’s because it’s based on the August-October inflation gauge, which is also at its highest in 40 years.
A related measure, the consumer price index, increased 8.2% In September, compared to last year, the Bureau of Labor Statistics announced on Thursday.
Older people will also see them Medicare Part B premiums drop In 2023, the first time in more than a decade that the tab will be lower than the previous year, the Centers for Medicare and Medicaid Services announced last month.
It’s only the fourth time that premiums have fallen since Medicare was created in 1965.
“This is a one-time retirement event,” Johnson said. “We have a historically high value for COLA legalization, and at the same time, Part B premiums will go down next year.”
The standard monthly premium will be $164.90 in 2023, down from $5.20 in 2022.
Then the discount comes Significant rise in installments 2022which raised the record monthly premium to $170.10, up from $148.50 in 2021.
The main driver for the 2022 rise was the expected jump in spending due to a costly new Alzheimer’s drug, Aduhelm. However, since then, the manufacturer Aduhelm has lowered the price and Limited CMS coverage of the drug.
Also, spending was less than expected on other Part B items and services, resulting in much larger reserves in the Part B Trust, allowing the Agency to limit future increases in premiums.
The combination of the major Social Security amendment and Medicare premium cuts for 2023 “will give seniors more peace of mind and breathing room,” said Kilolo Kigakazi, acting Social Security Administration commissioner.
Many seniors rely heavily on Social Security. About 42% of older women and 37% of older men depend on monthly payments for at least half of their income, according to the Social Security Administration.
Despite annual increases, benefits have not kept pace with the rising cost of living for years.
As of March, inflation has caused Social Security payments to lose 40% of their purchasing power since 2000, according to a study released earlier this year by the Association of Senior Citizens. Monthly interest must be increased by $540 to maintain the same level of purchasing power as in 2000.
Johnson said the league had seen a spike in emails from seniors who said they were struggling to provide for food, housing and other necessities starting in the summer of 2021. Some said they were eating only one meal a day or were driven from their homes.
Although he is happy to get the annual adjustment, Richard Moore sees it as “insignificant” due to the high cost of food, home heating oil, and other essentials.
Compounding the problem is that both Moore and his wife, Linda, are forced to take expensive medications, and their retirement savings have “blundered” due to the sharp decline in the stock market.
“It’s really a trivial increase as far as I’m concerned because right now, my expenses are much greater than my income,” said Moore, 84, who lives in Fishkill, New York, and works as an electrical engineer at IBM.
Madeline Heller relies on Social Security, alimony, and a small pension from her days as a teacher. Her limited money forced her to clip coupons, buy exactly what she needed and think twice about any additional purchases. She is looking forward to resuming her career as an arbitrator or mediator but feels discriminated against because of her age.
The annual adjustment will save her approximately an additional $15 per month, depending on the elderly’s expense.
“Can I buy two more loaves of bread?” asked the Santa Monica, California resident sarcastically. “There is nothing this kind of increase will do for me or anyone else.”
Although this year’s 5.9% increase was supposed to combat inflation, it only covers half the rise in Patty McCarthy’s monthly expenses. She gets about an extra $60 a month in Social Security benefits but spends an extra $120 on food, gas, and other necessities.
Inflation has prompted the 67-year-old to apply for jobs storing shelves in stores around her home in Mount Shasta, California, but she has received no responses yet.
“It’s scary. What do you have to cut back then?” she said. “You know, retirement is supposed to be fun and easier than this. And it isn’t.”
Johnson said the big annual amendment could actually end up hurting some seniors.
For example, the resulting increase in income can push them over thresholds for certain government benefits, such as Medicare Extra Help, Medicaid, food stamps and rental assistance, making them eligible for less or no assistance. Or they may have to pay more for their Medicare Part B premiums, which are adjusted for income.
Also, they may have to start paying taxes — or pay higher taxes — on their Social Security benefits if their income rises above a certain level.
In addition, the increase could leave Social Security finances on more fragile ground. Mutual trusts that pay benefits to retirees, survivors, and the disabled will be exhausted by 2035 and able to distribute only about three-quarters of the promised payments unless Congress addresses the program’s long-term funding shortfall, according to the latest report from the Social Security Trustees.
Maximum earnings subject to Social Security tax will increase to $160,200 for 2023, up from $147,000 this year.
This story has been updated with additional information.